China Said to Plan Boosting Export-Tax Rebates on Some Goods

Sept. 4 (Bloomberg) -- China may expand exporters’ tax
rebates to help them cope with a slump in trade growth,
according to three people with direct knowledge of the plan,
deploying a stimulus tool used during the global credit crunch.

The government may give a full rebate of the 17 percent
value-added tax on products including furniture, shoes and toys,
up from the current range of 13 percent to 15 percent, said the
people, who asked not to be identified because the discussions
are private. The policy may be rolled out as soon as this month,
depending on whether trade remains weak, they said.

Premier Wen Jiabao has pledged policy “fine tuning” to
cope with a deepening slowdown in the world’s second-largest
economy that saw export gains slump to an annual 1 percent pace
in July from 11 percent in June. The deterioration in trade
escalated the risk that Wen will miss his full-year economic
expansion target for the first time since he took office in 2003.

The policy change is unlikely to increase exports, said
Yang, who formerly worked for the International Monetary Fund.
“The biggest problem for Chinese exports now is the weak demand
from overseas markets, and tax rebates won’t help much in
boosting demand.”

Finance Ministry

Dai Bohua, a spokesman for the Ministry of Finance, which
oversees tax policy, didn’t answer the phone when Bloomberg News
attempted to reach him three times today. The ministry didn’t
immediately respond to faxed questions from Bloomberg News.

China used the tool in 2008 and 2009 to help the economy
when exports plunged during the global financial crisis, at one
point raising tax rebates on 553 products including motorcycles
and sewing machines. The nation’s exports fell 16 percent in
2009 from 2008.

Shipments abroad of products covered by the tax change
totaled at least $130 billion in 2011, or about 6.8 percent of
China’s overseas sales, based on data compiled by Bloomberg News.
China’s customs administration is scheduled to publish August
trade data on Sept. 10, and the September figures on Oct. 13.

The nation’s gross domestic product expanded 7.6 percent in
the second quarter from a year earlier, the slowest pace in
three years. Wen set a 2012 goal of 7.5 percent in March.

“Further policy loosening is needed to prevent a further
slowdown in production growth,” Sun Mingchun and Sun Chi, Hong
Kong-based economists at Daiwa Securities Group Inc., wrote in a
note today. “Export growth should remain weak.”

China needs targeted measures to promote steady growth in
overseas sales, including speedier payment of tax rebates, Wen
said during a visit last month to Guangdong, the biggest
exporter among China’s provinces.

The government provided 531.6 billion yuan ($84 billion) in
export-tax rebates in the first half of 2012, an increase of
16.4 percent from a year earlier, according to the Finance
Ministry.